"BIS warns of green asset bubble risk"

We pay attention to the Bank for International Settlements.* Over the years we've found them to be (somewhat surprisingly) forthright.

From Reuters, September 20:

The central bank to the world's central banks, the Bank for International Settlements, has warned of the growing risk of a price bubble in environmentally friendly-focused asset markets.

Increasing urgency to limit global warming and tackle other issues such as racial and social inequality has seen Environmental, Social and Governance (ESG) investing explode in popularity in recent years.

Some estimates indicate ESG-focused assets have soared to a value of $35 trillion and now account for more than a third of all assets professionally managed by banks and investment funds.

A narrower definition including only exchange-traded funds (ETFs) and mutual funds with ESG or socially responsible investment (SRI) mandates points to even faster, tenfold growth, to approximately $2 trillion. This is evidenced in assets such as clean energy and electric car stocks and green bonds, which have soared in recent years.

"There are signs that ESG assets’ valuations may be stretched," the BIS, which holds regular meetings for the world's central banks, said as part of its latest quarterly report.

Claudio Borio, head of its monetary and economic department, referred to it as the "green bubble" risk, highlighting how the surge in ETFs and mutual funds was comparable to parts of the mortgage backed security market in the runup to the global financial crisis.

"You could have too much, too quickly of a good thing," Borio said. "We know valuations are rather rich"....

....MUCH MORE

*In 2011 I tried to communicate my thinking on the BIS, note the dates:
Why You Really, Really Want to Listen to the Bank for International Settlements

On June 26, 2007 (i.e. pre-"Quant-quake", pre-Bear Stearns, pre-ought-eight-near-catastrohe) we posted a short little piece:
"(Off-topic) Banks' banker warns of downturn":

THE risk of a 1930s-style economic slump has been heightened by "euphoric" markets tapping cheap global credit, one of the world's pre-eminent financial institutions has said.

In its annual report, the Bank for International Settlements noted that the conditions that led to the Great Depression of the 1930s and the Asian crises in the 1990s reflected the current environment.

From The Age

On April 28, 2010 it was Greece: "Exposure fears weigh on French, German banks"
From MarketWatch:

Banks with local subsidiaries, government-lending exposure most at risk

Banks in France and Germany have the biggest exposure to Greece of non-Greek lenders are also heavily exposed to other potentially at-risk countries, with those firms that operate local subsidiaries or with big local-authority funding activities likely to face the heaviest losses, analysts said.

The latest figures from the Bank for International Settlements show French banks have $75.2 billion of exposure to Greek borrowers, while the industry in Germany has an exposure of $45 billion. The U.K. trails a relatively distant third, with exposure of $15.1 billion....

There is a reason the BIS is known as the "Central banker's central bank".
Here's their website. I try to visit a couple times per month.

See also:
Dec. 2012
BIS: "Global safe assets"
June 2008
BIS: Don't Worry, Inflation Not a Problem Because Global Economy Will Crash